#279: More Medicaid Delusion

Over at Forbes, Heartland Institute Senior Fellow Avik Roy writes this morning on the latest evidence of Medicaid’s failure--a Government Accountability Office report released last week that details the lack of physician access for children and youths on Medicaid and CHIP compared to the uninsured. GAO’s survey of physicians found 21 percent of were accepting “none” or only “some” new patients aged 0–18, compared to 45 percent for the uninsured and 53 percent for Medicaid/CHIP. Medicaid underperformed the uninsured significantly among primary care physicians and was no better than being uninsured when it came to specialists. As Roy points out:

Why would the uninsured do better than Medicaid? It turns out that Medicaid’s problems aren’t just that the program underpays doctors. It’s also that the program is a huge hassle to work with, in terms of paperwork and billing requirements. It’s also that Medicaid reimbursement checks come late, and it takes a lot of effort on the part of busy doctors to track bureaucrats down for timely payment. An uninsured patient who pays cash is infinitely easier to deal with, even the uninsured patient who only pays $20 up-front for an office visit.

From the GAO report:

Nonparticipating physicians – those not enrolled or not serving Medicaid and CHIP children – most commonly cite administrative issues such as low and delayed reimbursement and provider enrollment requirements as limiting their willingness to serve children in these programs.

The study gets at two problems: In an effort to control costs, Medicaid pays doctors too little, and too many uninsured people go without care. These are exactly the sort of problem health-care reform is designed to address. Most directly, the law dramatically expands coverage and increases Medicaid reimbursement rates, particularly for primary-care doctors. That doesn’t do much for the specialists, who were the subjects of this study, but it’s a start.

More importantly, the law is thick with efforts to control costs in the health-care system itself – and in Medicaid itself – which is the only approach that’s really sustainable over the long-term.

So adding approximately 25 million people to a financially unsustainable program with terrible health outcomes was intended as a way to address its problems? How absurd. And left unmentioned is the fact that as Heritage’s Brian Blase notes, this increased reimbursement rate for PCPs and the federal funding that goes with it expires on January 1, 2015 – at which point states will be forced to shoulder the cost burden or make gigantic cuts.

Former OMB Director Peter Orszag’s Foreign Affairs piece is jaw-dropping in its honest admissions about the PPACA rhetoric vs. reality:

Barack Obama’s presidential campaign had promised massive cost savings from reform, including $2,500 a year per family. But such savings were never going to be confirmed by the CBO under any scenario. And since the House bill was relatively weak on cost containment anyway but was the first version to receive a public CBO analysis, the contrast between Obama’s campaign promises and the CBO’s forecast proved something of a shock to the public.

Orszag also writes that employers

could start dropping high-risk workers by designing health plans that encourage these employees to purchase insurance on the exchanges. This is a legitimate concern. If employers altered their plans, this could create a spiral effect, in which those employees buying insurance on the exchanges would be disproportionately high-risk patients, raising premiums and defeating the purpose of risk sharing. The cost to the federal government of subsidizing coverage in the exchanges, in turn, could become unsustainable.

I’ve been very critical of The Economist’s coverage of health care issues in the past – its piece a few months back on the legal arguments over Obamacare contained 17 different factual errors, which were never retracted – but its critique of Massachusetts’ health care reality in the latest issue is dead-on:

It has plainly succeeded in its main goal of expanding health coverage. Just 1.9% of residents lacked insurance in 2010. Other data, though, are more troubling. Access to health insurance does not guarantee access to health care. One in five working-age adults say they have trouble finding a doctor who will see them. The Connector, the state’s exchange, has excelled at enrolling uninsured adults in subsidised care, but has failed to attract small businesses and their employees. As of March just 3,644 workers bought coverage on the exchange through their employers.

Costs, meanwhile, are unsustainable. Spending on MassHealth, the programme for the poor, rose 40% between 2006 and 2010. The subsidised health programme for adults was more expensive than expected – $628m in 2008 and $805m in 2009, 32% and 11% above projections respectively. This was offset in part by falling costs for a smaller cohort of uninsured, who tend to turn up for treatment at emergency rooms from which they cannot, by law, be turned away: the figure dropped from $652 billion in 2006 to $414m in 2009. But the decline was less dramatic than many hoped, says Amy Lischko, a professor at Tufts University who helped write the law. And demand from the uninsured now seems to be rising. Last year the number of uninsured hospital visits reached 800,000, 14% above the level in 2009.

Julian Pecquet on industry firing back at a report that shows no negative health outcomes for Medicare beneficiaries in the wake of a rollout of a competitive bidding program:

Industry groups are lambasting a new government report that found “no significant changes in health outcomes” for Medicare beneficiaries since the agency started competitive bidding for durable medical equipment such as wheelchairs.

Competitive bidding was created by the 2003 Medicare reform law and seeks to replace standard fees with market competition among providers. The American Association for Homecare says patients are being hurt by the competitive bidding program because they’re losing access to the products and services they need.

“In contrast to yesterday’s CMS report that there have been no changes in beneficiary health outcomes resulting from the competitive bidding program,” the trade group said via e-mail, “AAHomecare and other members of the homecare community are hearing a markedly different story from patients and providers affected by the program.”

In California, the Sacramento Bee editorializes in favor of the state seizing the authority to reject rate increases:

It is worth asking just why insurance companies don’t want to have to justify their rate increases before they are implemented – or to go back to the drawing table if their proposed rates are found to be “excessive, inadequate or unfairly discriminatory.”

Opponents have falsely characterized the bill as state regulators “setting rates” or as “setting arbitrary limits on private insurance.” The bill does neither.

All it does is require health insurers to submit evidence and a rational reason for the rates they have chosen. If the insurer can show that the new rate is reasonable in relation to the benefits provided, it gets approved.

If the insurer can’t do that, the bill simply gives state officials the authority to reject the rate proposal.

Last week I interviewed Sen. Tom Coburn (R-OK) about his approach to Medicare reform and more. I also asked him about what motivation will exist for companies to create new innovations in a climate where such things are discouraged for cost reasons. He answered:

That’s a great question and we ought to just step back and think about the last 20 years in our country. Around the rest of the world they have government-run health care programs. So three-quarters of all the innovations in health care have come out of ours. Why have they come out of our system? Because we don’t have total government-run. We have 60 percent of our health care run by the government. But that 40 percent of the private sector has created a rich reward environment where people will invest capital to get new treatments, new outcomes, new medical devices, new drugs because there was a way to get rewarded for that. And when this [Obamacare] gets applied, you’re going to see medical innovation come to a grinding halt. We’re already starting to see it with just medical devices moving off shore to be approved over in Europe. They’re starting to do the research over there. We’re running companies out because of just the bureaucratic side of it.

But the real thing, the entrepreneurial capitalist system that says I can make a buck by creating innovation, is going to dwindle because the IPAB board and the Innovation Council are going to say, it can’t be used in the government. And remember, we’re shifting from 60 percent government-run, we’re going to be about 85 percent government-run when this thing is over, because the number of companies, about half the companies now by the latest estimates, who have insurance for their employees are going to drop it. They’re going to pay the fine and then they’re going to go to the insurance exchange. And of course the insurance exchange is going to limit coverage as well, and that’s going to cost is $2.6 trillion over 10 years to move all those people to there. Plus instead of 16 million new people going into Medicaid, the estimate is now at 25 million are going into Medicaid.

So you’re going to see us go from 60 percent government-run health care to 85 percent – you’re eventually going to see government-run single-payer in this country, under Obamacare.